"I'm encouraged by Yahoo!'s performance in the second quarter. Our
business saw continued stability, and we launched more products than
ever before, introducing a significant new product almost every week,"
said Yahoo! CEO Marissa Mayer. "From the new Yahoo! News, the new Yahoo!
Sports app, the redesigned Yahoo! search, the new Flickr, the new Yahoo!
Mail for tablet, the Yahoo! Weather app, our new Yahoo! app with Summly
- this quarter drove tremendous improvements in our product line and our
users responded with increased usage and engagement."

GAAP revenue was $1,135 million for the second quarter of 2013, a 7
percent decrease from the second quarter of 2012. Revenue excluding
traffic acquisition costs ("revenue ex-TAC") was $1,071 million for the
second quarter of 2013, a 1 percent decrease compared to the second
quarter of 2012.

Adjusted EBITDA for the second quarter of 2013 was $369 million, a 7
percent decrease compared to the same period of 2012.

GAAP income from operations was $137 million for the second quarter of
2013, a 150 percent increase from the second quarter of 2012 (which
reflected a restructuring charge of $129 million). Non-GAAP income from
operations was $209 million for the second quarter of 2013, a 13 percent
decrease from the second quarter of 2012.

GAAP net earnings for the second quarter of 2013 was $331 million, a 46
percent increase from the same period of 2012. Non-GAAP net earnings for
the second quarter of 2013 was $386 million, a 6 percent increase from
the same period of 2012.

GAAP net earnings per diluted share was $0.30 in the second quarter of
2013, compared to $0.18 in the second quarter of 2012. Non-GAAP net
earnings per diluted share was $0.35 in the second quarter of 2013,
compared to $0.30 in the second quarter of 2012.

Business Highlights

Yahoo! accelerated its pace of innovation in the second quarter,
launching nearly a dozen new product experiences for its core daily
habits - including re-imagined desktop, mobile and tablet versions of
Mail, Weather, Flickr, Search, Sports, News, and Yahoo! for iPhone and
Android.

The Company announced two new advertising formats designed to enhance
the content experience in a more intuitive and immersive way. Yahoo!
Stream Ads offer unobtrusive native ads that are part of a user's
Yahoo! news stream. The Company also unveiled a new Yahoo.com
Billboard ad, designed to deliver richer content interactions to users
and increased effectiveness to advertisers.

Yahoo! is offering additional content as part of its partnerships with
leading news and entertainment brands such as ABC News, CNBC, and
Condé Nast Entertainment, adding breadth to its existing portfolio of
partner content and enhancing Yahoo!'s cross-screen experiences. The
Company also announced a partnership between Yahoo! and Broadway Video
Entertainment, along with NBC Entertainment, to bring the "Saturday
Night Live" archive clips from 1975 to 2013 exclusively to Yahoo!.

During the second quarter, Yahoo! made nine acquisitions to strengthen
its products, content offerings, core technology and talent -
including Summly, Astrid, Milewise, Loki Studios, Go Poll Go,
PlayerScale, Rondee, Ghostbird Software and Tumblr. Tumblr is one of
the fastest-growing media networks in the world. Its tremendous
popularity and engagement among creators, curators and audiences of
all ages brings a significant community of users to the Yahoo!
network. The combination of Tumblr and Yahoo! is expected to grow
Yahoo!'s audience to more than one billion monthly visitors.

Second Quarter 2013 Financial Highlights

Display:

GAAP display revenue was $472 million for the second quarter of 2013,
a 12 percent decrease compared to $535 million for the second quarter
of 2012.

Display revenue ex-TAC was $423 million for the second quarter of
2013, an 11 percent decrease compared to $473 million for the second
quarter of 2012.

The Number of Ads Sold (excluding Korea) decreased approximately 2
percent compared to the second quarter of 2012.

Price-per-Ad (excluding Korea) decreased approximately 12 percent
compared to the second quarter of 2012.

Search:

GAAP search revenue was $418 million for the second quarter of 2013, a
9 percent decrease compared to $461 million for the second quarter of
2012.

Search revenue ex-TAC was $403 million for the second quarter of 2013,
a 5 percent increase compared to $385 million for the second quarter
of 2012.

Paid Clicks (excluding Korea) increased approximately 21 percent
compared to the second quarter of 2012.

Price-per-Click (excluding Korea) decreased approximately 8 percent
compared to the second quarter of 2012.

Cash Balance:

Cash, cash equivalents, and investments in marketable securities were
$4.8 billion as of June 30, 2013 compared to $6 billion as of December
31, 2012, a decrease of $1.2 billion.

During the second quarter of 2013, Yahoo! repurchased 25 million
shares for $653 million and used a net $1 billion in cash for
acquisitions (including a net $970 million to acquire Tumblr). These
outflows were offset by $846 million in cash from Alibaba Group to
redeem the Alibaba Group Preference Shares. The cash received
represents the redemption value and includes the stated value of $800
million plus dividends of $46 million.

"We are happy to announce that as of today we have essentially completed
our commitment to return $3.65 billion from our Alibaba Group proceeds
to shareholders, repurchasing a total of 190 million shares," said
Yahoo! CFO Ken Goldman. "As part of our ongoing commitment to
shareholders, we plan to continue to execute against the $5 billion
share buyback that was authorized last year, of which approximately $1.9
billion remains. We plan to repurchase shares in open market or
privately negotiated transactions."

Live Stream

Yahoo! will live stream a video broadcast of the Company's second
quarter 2013 financial results at 2 p.m. Pacific Time/5 p.m. Eastern
Time today. The live stream will be broadcast from Yahoo!'s Sunnyvale
studio and will be available exclusively on Yahoo! Finance at http://finance.yahoo.com.
The Company will provide its business outlook for the third quarter and
full year during the presentation. Supplemental financial information
can be accessed through the Company's Investor Relations website at http://investor.yahoo.com.
The video webcast will be archived after the event at http://investor.yahoo.com
and will be available for 90 days following the broadcast.

Non-GAAP Financial Measures

This press release and its attachments include the following financial
measures defined as non-GAAP financial measures by the Securities and
Exchange Commission ("SEC"): revenue ex-TAC; adjusted EBITDA; non-GAAP
income from operations; non-GAAP net earnings; non-GAAP net earnings per
share - diluted; and free cash flow.

Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted
EBITDA, non-GAAP income from operations, non-GAAP net earnings and
non-GAAP net earnings per share - diluted, exclude from the most
comparable GAAP financial measures certain gains, losses, and expenses
that we do not believe are indicative of ongoing results, and exclude
stock-based compensation expense. Adjusted EBITDA also excludes taxes,
depreciation, amortization of intangible assets, other income, net
(which includes interest), earnings in equity interests, and net income
attributable to noncontrolling interests. Free cash flow is GAAP net
cash provided by operating activities (adjusted to include excess tax
benefits from stock-based awards), less acquisition of property and
equipment, net and dividends received from equity investees.

These measures may be different than non-GAAP financial measures used by
other companies. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
generally accepted accounting principles ("GAAP"). Explanations of the
Company's non-GAAP financial measures and reconciliations of these
financial measures to the GAAP financial measures the Company considers
most comparable are included in the accompanying "Note to Unaudited
Condensed Consolidated Financial Statements," "Supplemental Financial
Data and GAAP to Non-GAAP Reconciliations," and "GAAP to Non-GAAP
Reconciliations."

About Yahoo!

Yahoo! is focused on making the world's daily habits inspiring and
entertaining. By creating highly personalized experiences for our users,
we keep people connected to what matters most to them, across devices
and around the world. In turn, we create value for advertisers by
connecting them with the audiences that build their businesses. Yahoo!
is headquartered in Sunnyvale, California, and has offices located
throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East
and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net)
or the Company's blog (yahoo.tumblr.com).

"Affiliates" refers to the third-party entities that have integrated
Yahoo!'s advertising offerings into their Websites or other offerings
(those Websites and other offerings, "Affiliate sites").

Additional information about how "Number of Ads Sold," "Paid Clicks,"
"Price-per-Ad," and "Price-per-Click" are defined and calculated is
included under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2013,
which is on file with the SEC and available on the SEC's website at www.sec.gov.
Due to the closure of the Korea business in the fourth quarter of 2012,
"Number of Ads Sold", "Paid Clicks", "Price-per-Ad", and
"Price-per-Click," as presented above, exclude the Korea market for all
periods.

"Search Agreement" refers to the Search and Advertising Services and
Sales Agreement between Yahoo! and Microsoft Corporation, as amended.

"TAC" refers to traffic acquisition costs.TAC consists of
payments to Affiliates and payments made to companies that direct
consumer and business traffic to Yahoo! Properties.

"Yahoo! Properties" refers to the online properties and services that
Yahoo! provides to users.

This press release contains forward-looking statements concerning
Yahoo!'s expected financial performance and Yahoo!'s strategic and
operational plans (including, without limitation, the quotation from
management). Risks and uncertainties may cause actual results to differ
materially from the results predicted, and reported results should not
be considered as an indication of future performance. The potential
risks and uncertainties include, among others, acceptance by users of
new products and services (including, without limitation, products and
services for mobile devices and alternative platforms); Yahoo!'s ability
to compete with new or existing competitors; reduction in spending by,
or loss of, advertising customers; risks associated with the Search
Agreement with Microsoft Corporation; risks related to Yahoo!'s
regulatory environment; interruptions or delays in the provision of
Yahoo!'s services; security breaches; risks related to joint ventures
and the integration of acquisitions; risks related to Yahoo!'s
international operations; adverse results in litigation; Yahoo!'s
ability to protect its intellectual property and the value of its
brands; dependence on third parties for technology, services, content,
and distribution; and general economic conditions. All information set
forth in this press release and its attachments is as of July 16, 2013.
Yahoo! does not intend, and undertakes no duty, to update this
information to reflect subsequent events or circumstances. More
information about potential factors that could affect the Company's
business and financial results is included under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the year ended December 31, 2012 and Quarterly Report on
Form 10-Q for the quarter ended March 31, 2013, which are on file with
the SEC and available on the SEC's website at www.sec.gov.
Additional information will also be set forth in those sections in
Yahoo!'s Quarterly Report on Form 10-Q for the quarter ended June 30,
2013, which will be filed with the SEC in the third quarter of 2013.

Yahoo!, Flickr and the Yahoo! logos are trademarks and/or registered
trademarks of Yahoo! Inc. All other names are trademarks and/or
registered trademarks of their respective owners.

Yahoo! Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

December 31,

June 30,

2012

2013

ASSETS

Current assets:

Cash and cash equivalents

$

2,667,778

$

1,142,223

Short-term marketable securities

1,516,175

1,486,591

Accounts receivable, net

1,008,448

941,811

Prepaid expenses and other current assets

460,312

887,677

Total current assets

5,652,713

4,458,302

Long-term marketable securities

1,838,425

2,161,814

Alibaba Group Preference Shares

816,261

-

Property and equipment, net

1,685,845

1,579,822

Goodwill

3,826,749

4,582,588

Intangible assets, net

153,973

398,300

Other long-term assets

289,130

171,210

Investments in equity interests

2,840,157

2,874,387

Total assets

$

17,103,253

$

16,226,423

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

184,831

$

120,028

Accrued expenses and other current liabilities

808,475

763,117

Deferred revenue

296,926

294,968

Total current liabilities

1,290,232

1,178,113

Long-term deferred revenue

407,560

333,229

Capital lease and other long-term liabilities

124,587

125,639

Deferred and other long-term tax liabilities, net

675,271

730,708

Total liabilities

2,497,650

2,367,689

Total Yahoo! Inc. stockholders' equity

14,560,200

13,808,864

Noncontrolling interests

45,403

49,870

Total equity

14,605,603

13,858,734

Total liabilities and equity

$

17,103,253

$

16,226,423

Yahoo! Inc.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2013

2012

2013

Revenue

$

1,217,794

$

1,135,244

$

2,439,027

$

2,275,612

Operating expenses:

Cost of revenue - traffic acquisition costs

137,025

64,316

281,116

130,384

Cost of revenue - other

278,453

271,262

532,432

549,269

Sales and marketing

272,910

279,738

558,178

536,757

Product development

199,628

236,248

428,106

455,828

General and administrative

136,117

135,039

260,388

268,460

Amortization of intangibles

9,756

8,084

19,809

15,449

Restructuring charges, net

129,092

3,578

134,809

(3,484

)

Total operating expenses

1,162,981

998,265

2,214,838

1,952,663

Income from operations

54,813

136,979

224,189

322,949

Other income, net

20,175

23,606

22,453

40,678

Income before income taxes and earnings in equity interests

74,988

160,585

246,642

363,627

Provision for income taxes

(26,523

)

(50,267

)

(82,942

)

(80,003

)

Earnings in equity interests

179,991

224,690

352,234

442,278

Net income

228,456

335,008

515,934

725,902

Less: Net income attributable to noncontrolling interests

(1,825

)

(3,858

)

(2,960

)

(4,467

)

Net income attributable to Yahoo! Inc.

$

226,631

$

331,150

$

512,974

$

721,435

Net income attributable to Yahoo! Inc. common stockholders per
share - diluted (1)

$

0.18

$

0.30

$

0.42

$

0.65

Shares used in per share calculation - diluted

1,221,719

1,094,694

1,224,102

1,101,395

Stock-based compensation expense by function:

Cost of revenue - other

$

2,614

$

3,029

$

5,508

$

6,607

Sales and marketing

18,981

23,775

40,078

39,820

Product development

17,808

20,537

37,279

28,800

General and administrative

10,168

20,795

22,672

37,514

Restructuring expense reversals, net

(3,429

)

-

(3,429

)

-

Supplemental Financial Data:

Revenue ex-TAC

$

1,080,769

$

1,070,928

$

2,157,911

$

2,145,228

Adjusted EBITDA

$

397,715

$

369,182

$

782,022

$

754,787

Free cash flow

$

93,390

$

131,400

$

289,213

$

281,308

(1)

The impact of outstanding stock awards of entities in which the
Company holds equity interests that are accounted for using the
equity method reduced the Company's diluted earnings per share by
$0.01 for the three months ended June 30, 2012 and the six months
ended June 30, 2013.

Yahoo! Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2013

2012

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

228,456

$

335,008

$

515,934

$

725,902

Adjustments to reconcile net income to net cash provided by
operating activities:

This press release and its attachments include the non-GAAP financial
measures of revenue excluding traffic acquisition costs ("revenue
ex-TAC"); adjusted EBITDA; non-GAAP income from operations; non-GAAP net
earnings; non-GAAP net earnings per diluted share; and free cash flow,
which are reconciled to revenue; net income attributable to Yahoo! Inc.
(in the case of adjusted EBITDA and non-GAAP net earnings); income from
operations; net income attributable to Yahoo! Inc. common stockholders
per share - diluted; and net cash provided by operating activities,
which we believe are the most comparable GAAP measures. We use these
non-GAAP financial measures for internal managerial purposes and to
facilitate period-to-period comparisons. We describe limitations
specific to each non-GAAP financial measure below. Management generally
compensates for limitations in the use of non-GAAP financial measures by
relying on comparable GAAP financial measures and providing investors
with a reconciliation of the non-GAAP financial measure to the most
directly comparable GAAP financial measure or measures. Further,
management uses non-GAAP financial measures only in addition to and in
conjunction with results presented in accordance with GAAP. We believe
that these non-GAAP financial measures reflect an additional way of
viewing aspects of our operations that, when viewed with our GAAP
results, provide a more complete understanding of factors and trends
affecting our business. These non-GAAP measures should be considered as
a supplement to, and not as a substitute for, or superior to, revenue,
net income attributable to Yahoo! Inc., income from operations, net
income attributable to Yahoo! Inc. common stockholders per share -
diluted, and net cash provided by operating activities calculated in
accordance with GAAP.

Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue
less TAC. TAC consists of payments made to third-party entities that
have integrated our advertising offerings into their Websites or other
offerings (those Websites and other offerings, "Affiliate sites") and
payments made to companies that direct consumer and business traffic to
Yahoo!'s online properties and services ("Yahoo! Properties"). Based on
the terms of the Search Agreement with Microsoft, Microsoft retains a
revenue share of 12 percent of the net (after TAC) search revenue
generated on Yahoo! Properties and Affiliate sites in transitioned
markets. Yahoo! reports the net revenue it receives under the Search
Agreement as revenue and no longer presents the associated TAC.
Accordingly, for transitioned markets Yahoo! reports GAAP revenue
associated with the Search Agreement on a net (after TAC) basis rather
than a gross basis. For markets that have not yet transitioned, revenue
continues to be recorded on a gross basis, and TAC is recorded as a part
of operating expenses. We present revenue ex-TAC to provide investors a
metric used by the Company for evaluation and decision-making purposes
during the Microsoft transition and to provide investors with comparable
revenue numbers when comparing periods preceding, during and following
the transition period. A limitation of revenue ex-TAC is that it is a
measure which we have defined for internal and investor purposes that
may be unique to the Company, and therefore it may not enhance the
comparability of our results to other companies in our industry who have
similar business arrangements but address the impact of TAC differently.
Management compensates for these limitations by also relying on the
comparable GAAP financial measures of revenue and total operating
expenses, which includes TAC in non-transitioned markets.

Adjusted EBITDA is defined as net income attributable to Yahoo! Inc.
before taxes, depreciation, amortization of intangible assets,
stock-based compensation expense, other income, net (which includes
interest), earnings in equity interests, net income attributable to
noncontrolling interests and other gains, losses, and expenses that we
do not believe are indicative of our ongoing results. Yahoo! presents
adjusted EBITDA because the exclusion of certain gains, losses, and
expenses facilitates comparisons of the operating performance of our
Company on a period to period basis. Adjusted EBITDA has limitations as
an analytical tool and should not be considered in isolation or as a
substitute for results reported under GAAP. These limitations include:
adjusted EBITDA does not reflect tax payments and such payments reflect
a reduction in cash available to us; adjusted EBITDA does not reflect
the periodic costs of certain capitalized tangible and intangible assets
used in generating revenues in our businesses; adjusted EBITDA does not
include stock-based compensation expense related to the Company's
workforce; adjusted EBITDA also excludes other income, net (which
includes interest), earnings in equity interests, net income
attributable to noncontrolling interests and other gains, losses, and
expenses that we do not believe are indicative of our ongoing results,
and these items may represent a reduction or increase in cash available
to us; and adjusted EBITDA is a measure that may be unique to the
Company, and therefore it may not enhance the comparability of our
results to other companies in our industry. Management compensates for
these limitations by also relying on the comparable GAAP financial
measure of net income attributable to Yahoo! Inc., which includes taxes,
depreciation, amortization, stock-based compensation expense, other
income, net (which includes interest), earnings in equity interests, net
income attributable to noncontrolling interests and the other gains,
losses and expenses that are excluded from adjusted EBITDA.

Non-GAAP income from operations is defined as income from operations
excluding certain gains, losses, and expenses that we do not believe are
indicative of our ongoing operating results and further adjusted to
exclude stock-based compensation expense. Because of the variety of
equity awards used by companies, the varying methodologies for
determining stock-based compensation expense, and the subjective
assumptions involved in those determinations, we believe excluding
stock-based compensation expense enhances the ability of management and
investors to understand the impact of stock-based compensation expense
on income from operations. We consider non-GAAP income from operations
to be a profitability measure which facilitates the forecasting of our
operating results for future periods and allows for the comparison of
our results to historical periods. A limitation of non-GAAP income from
operations is that it does not include all items that impact our income
from operations for the period. Management compensates for this
limitation by also relying on the comparable GAAP financial measure of
income from operations which includes the gains, losses, and expenses
that are excluded from non-GAAP income from operations.

Non-GAAP net earnings is defined as net income attributable to Yahoo!
Inc. excluding certain gains, losses, expenses, and their related tax
effects that we do not believe are indicative of our ongoing results and
further adjusted to exclude stock-based compensation expense and its
related tax effects. Because of the variety of equity awards used by
companies, the varying methodologies for determining stock-based
compensation expense, and the subjective assumptions involved in those
determinations, we believe excluding stock-based compensation expense
enhances the ability of management and investors to understand the
impact of stock-based compensation expense on net income and net income
per share. We consider non-GAAP net earnings and non-GAAP net earnings
per diluted share to be profitability measures which facilitate the
forecasting of our results for future periods and allow for the
comparison of our results to historical periods. A limitation of
non-GAAP net earnings and non-GAAP net earnings per diluted share is
that they do not include all items that impact our net income and net
income per diluted share for the period. Management compensates for this
limitation by also relying on the comparable GAAP financial measures of
net income attributable to Yahoo! Inc. and net income attributable to
Yahoo! Inc. common stockholders per share - diluted, both of which
include the gains, losses, expenses and related tax effects that are
excluded from non-GAAP net earnings and non-GAAP net earnings per
diluted share.

Free cash flow is a non-GAAP financial measure defined as net cash
provided by operating activities (adjusted to include excess tax
benefits from stock-based awards), less acquisition of property and
equipment, net and dividends received from equity investees. We consider
free cash flow to be a liquidity measure which provides useful
information to management and investors about the amount of cash
generated by the business after the acquisition of property and
equipment, which can then be used for strategic opportunities including,
among others, investing in the Company's business, making strategic
acquisitions, strengthening the balance sheet, and repurchasing stock. A
limitation of free cash flow is that it does not represent the total
increase or decrease in the cash balance for the period. Management
compensates for this limitation by also relying on the net change in
cash and cash equivalents as presented in the Company's unaudited
condensed consolidated statements of cash flows prepared in accordance
with GAAP which incorporates all cash movements during the period.

Direct costs for each segment include cost of revenue (excluding
TAC) and other operating expenses that are directly attributable to
the segment such as employee compensation expense (excluding
stock-based compensation expense), local sales and marketing
expenses, and facilities expenses.

(3)

Global operating costs include product development, service
engineering and operations, general and administrative, and other
corporate expenses that are managed on a global basis and that are
not directly attributable to any particular segment.

Yahoo! Inc.

GAAP to Non-GAAP Reconciliations

(in thousands, except per share amounts)

Three Months Ended

June 30,

2012

2013

GAAP income from operations

$

54,813

$

136,979

(a)

Restructuring charges, net

129,092

3,578

(b)

Stock-based compensation expense

49,571

68,136

(c)

Deal costs related to the sale of Alibaba Group shares

6,500

-

Non-GAAP income from operations (4)

$

239,976

$

208,693

GAAP net income attributable to Yahoo! Inc.

$

226,631

$

331,150

(a)

Restructuring charges, net

129,092

3,578

(b)

Stock-based compensation expense

49,571

68,136

(c)

Deal costs related to the sale of Alibaba Group shares

6,500

-

(d)

To adjust the provision for income taxes to exclude the tax
impact of items (a) through (c) above for the three months ended
June 30, 2012 and 2013

The impact of outstanding stock awards of entities in which the
Company holds equity interests that are accounted for using the
equity method reduced the Company's diluted earnings per share by
$0.01 for the three months ended June 30, 2012 and the six months
ended June 30, 2013.

(4)

Commencing in 2013, non-GAAP income from operations excludes
stock-based compensation expense. Prior period amounts have been
revised to conform to the current presentation.

(5)

Commencing in 2013, non-GAAP net earnings and non-GAAP net
earnings per share - diluted exclude stock-based compensation
expense and its related tax effects. Prior period amounts have been
revised to conform to the current presentation.